Residential unit rent increase capped at 4% 

Are you aware that there is a limit on how much residential rents can be increased this year?  

Residential units with rents of Pesos Ten Thousand and below per month may only be increased by a maximum of four percent in 2024.

Rent Control Act

Republic Act No. 9653 or the Rent Control Act of 2009 mandated the State to “continue to protect housing tenants in the lower income brackets and other beneficiaries from unreasonable rent increases.”

In the said Act, the residential unit was defined as “an apartment, house and/or land on which another’s dwelling is located and used for residential purposes and shall include not only buildings, part or units thereof used solely as dwelling places, boarding houses, dormitories, rooms and bed spaces offered for rent by their owners, except motels, motel rooms, hotels, hotel rooms, but also those users for home industries, retail stores or other business purposes if the owner thereof and his or her family actually live therein and use it principally for dwelling purposes.”

After initially disallowing any increase in the rent of residential units for a period of one year upon the passage of the Act, and subsequently limiting the rent  increase by no more than seven percent until December 31, 2013, the former Housing and Urban Development Coordinating Council (HUDCC) was granted “the authority to continue the regulation of the rental of certain residential units, to determine the period of regulation and its subsequent extensions if warranted, to determine the residential units covered and to adjust the allowable limit on rental increases per annum.”

With the passage of Republic Act No. 11201, the Department of Human Settlements and Urban Development (DHSUD) was created through the consolidation of HUDCC and the Housing and Land Use Regulatory Board, while the National Human Settlements Board (NHSB) was formed to act as the single policy-making body and provide overall policy directions and program development to the different attached shelter agencies of DHSUD.

Households covered

According to the 2020 Census on Population and Housing (2020 CPH), 2,858,920 or 10.8 percent of the total households rent the housing unit or lot they occupy, with approximately 95 percent of them paying monthly rents of P10,000 or less.  

Of these figures, 72.3 percent of renting households live in four regions namely, National Capital Region, Calabarzon (4A), Cordillera Autonomous Region (CAR), and Central Luzon (3), and with higher concentration in urban rather than rural areas. 

An increase in renters was noted in 2022, with 9.5 and 1.9 percent of households found to be renting house/room including lot and own house-rent lot respectively, according to the 2022 Annual Poverty Indicators Survey.

One in four Filipino households are headed by women.

Balancing act

The 2023 nationwide average minimum daily wage increased by approximately seven percent.  Central Luzon had the lowest increase at 2.2 percent, while Western Visayas had the highest at 13.9 percent.

The inflation rate for actual rentals for housing last July 2023 (YTD) reached 5.1 percent compared to 6.8 percent for all items during the same period. The higher inflation rate for the bottom 30 percent of income households was mainly driven by food and non-alcoholic beverages.

Given the magnitude of renting households, a modest increase in daily wage, and inflation rate – rentals for housing, among others, a uniform maximum percentage increase was passed by the National Human Settlement Board through Resolution No. 2023-03, and capped at the upper bound of the inflation rate of the Administration.  This is a change in the three-tier lease rates’ increases set in previous years.

Coverage and exemptions

The ceiling on rent increase applies only to units already occupied by the same tenants as of 2023, paying P10,000 and below per month, and continuing to occupy/renew their lease in 2024. The proposed adjustment may only start during the new lease period. 

The lessor cannot impose a rate increase higher than four percent in case of the untimely death of the lessee or signatory of the lease agreement. On the other hand, should the unit become vacant in 2024, the lessor may increase the rent for a new tenant beyond four percent, provided that in the case of boarding houses, dormitories, rooms, and bed spaces, no rent increase more than once a year shall be allowed. 

Residential units with rents above P10,000 per month are excluded from being imposed such a rental increase cap. New residential units built and/or leased out in 2024 may also set their desired rent.

Penal provision

Lessors found guilty of violating the above provision may face a fine of not less than P25,000 nor more than P50,000, or imprisonment of not less than one month and one day to not more than six months, or both, as determined by the court.

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Henry L. Yap is an Architect and Fellow of both Environmental Planning and Real Estate Management. He is one of the Undersecretaries of the Department of Human Settlements and Urban Development.